Living Will vs. Living Trust
Which estate-planning option is right for you?
Many people confuse living wills with living trusts because they're both estate planning options and they sound so much alike. But living wills and living trusts serve two entirely different purposes. A living trust covers three phases of your life while a living will cover only what happens if you're incapacitated.
What Is a Living Will?
A living will is a document that allows you to explain your wishes regarding the medical procedures you want or don't want in the event that your health becomes critical. It comes into play when — and only when — you can't voice your own wishes.
You might be in an irreversible coma, or maybe you're suffering from a terminal illness. You're no longer lucid and you can no longer express the steps you want taken to preserve — or not to preserve — your life. Do you want your heart resuscitated if it stops? Would you rather not be placed on a ventilator even if it means saving your life?
A living will is specifically designed to deal with how you feel about life-ending versus life-sustaining procedures. It can also address issues of palliative care and organ donation. It allows you to express your wishes in advance at a time when your life is not yet threatened and you're thinking clearly.
A living will only cover one stage of your life — when you're near death.
A Variation on Living Wills
The living will can also be incorporated into an advance medical directive, a legal document that allows you to designate someone else to make health care decisions for you if you're unable to do so yourself.
An advance medical directive isn't the same thing as a living will because a living will does not name or appoint anyone else to speak for you. It merely states your own wishes in advance and explains under what circumstances you want health care providers to attempt to prolong your life or to cease life-sustaining measures.
What Is a Living Trust?
A living trust is a legal entity created by an individual to hold and own their assets after they transfer them into the trust's ownership. This property is typically invested and spent for the benefit of the beneficiary, who is typically the trust maker — the person who created the trust — at least during their lifetime.
A trust is managed by a trustee, and the trust maker also usually serves in this role, at least when the living trust is revocable. Different rules apply to irrevocable trusts. It's common to name a successor trustee as well, someone to step in and manage the trust should the trust maker become mentally incapacitated and unable to do so.
A living trust helps manage your affairs while you're alive and well. It also serves to maintain the status quo while you're alive but not so well and at your death. Your successor trustee will disperse the trust's assets to your named beneficiaries when you die, or they might keep the trust up and running according to your wishes.
There's One Similarity
One similarity between a revocable living trust and a living will is that both safeguard against mental incapacitation. If you should reach a point where you're no longer of sound mind or physically able to handle your financial affairs, your successor trustee takes over management of your trust.
A living will does much the same thing with regard to your health care. It expresses your wishes at a time when you're unable to do so.
If you're not sure if you need a living will, a revocable living trust, or both, meet with an estate planning attorney to make sure you have all your bases covered. You can pass your estate on to beneficiaries in numerous other ways, but only a living will can unequivocally state your wishes for end of life.